February 19th 2020: FOMC Eyed as Dollar Index Marches North.

February 19th 2020: FOMC Eyed as Dollar Index Marches North., FP Markets

EUR/USD:

Monthly timeframe:

Partially altered outlook from previous analysis –

Despite a healthy attempt at recovery from demand at 1.0488/1.0912 in October 2019 – a particularly noteworthy area given the momentum derived from its base – EUR/USD failed to sustain gains, and had the unit retesting its upper boundary last week, with price beginning to tunnel through its range, as we write.

Although down 2.66% on the month and in-line with the primary downtrend, which has been lower since 2008, we cannot rule out the possibility of fresh upside attempts from current demand yet.

Additional structure worth noting on the monthly timeframe is demand-turned supply at 1.1857/1.1352 and a reasonably ‘fresh’ demand area coming in at 0.9581/1.0221.

Daily timeframe:

Partially altered outlook from previous analysis –

Since retesting supply at 1.1117/1.1078, the unit has retained a strong underlying offer, consuming a demand zone at 1.1001/1.0946, dethroning the 1.0879 October 1st low and recently bottoming a few points ahead of demand at 1.0680/1.0781 (formed April 2017 and houses a 127.2% Fibonacci ext. point within at 1.0724).

The RSI is also seen testing channel support.

H4 timeframe:

As underlined in previous writing, demand at 1.0832/1.0877 echoed a fragile tone since late last week, having its lower edge absorbed Friday and tested further on Monday. We can see buyers abandoned the said demand Tuesday, as sellers continued to glean resistance from channel support-turned resistance (1.1034 – yellow).

The next area of interest falls in reasonably close by at demand from 1.0738/1.0774.

Another area of interest is a recently formed local supply zone at 1.0838/1.0823, essentially the decision point to drop lower. As you can see, this area was tested shortly after forming – the 1.0825 high.

H1 timeframe:

The euro surrendered further ground against the US dollar Tuesday, weighed by disappointing data out of Germany.

According to ZEW, the ZEW Indicator of Economic Sentiment for Germany decreased sharply in February, falling 18.0 points to a new reading of 8.7 points. The indicator is thus slightly below its December 2019 level. The assessment of the economic situation in Germany has also worsened compared to the previous month, with the corresponding indicator dropping to a level of minus 15.7 points, 6.2 points lower than in January.

In addition to the above, the NY Empire State Manufacturing Index advanced sharply in February, bolstering the US dollar across the board. The empire state manufacturing survey noted: Business activity picked up in New York State, according to firms responding to the February 2020 Empire State Manufacturing Survey. The headline general business conditions index moved up eight points to 12.9. The new orders index shot up 16 points to 22.1, and the shipments index climbed to 18.9.

Technical action had the candles grinding the underside of the 50-period SMA, eventually forcing a move south of the 1.08 handle, before pulling back and retesting the decision point, the supply zone at 1.0837/1.0824, which, as you can see, held ground.

The day closed a touch beneath 1.08, with the RSI indicator seen trading nearby oversold terrain.

Direction:

Longer term, we could eventually see a rebound higher from monthly demand at 1.0488/1.0912, as underlined in Monday’s technical report. However, given daily price is also seen trading within a whisker of demand at 1.0680/1.0781, that recovery attempt may come sooner rather than later.

Shorter-term focus shows H4 price has room to approach demand coming in at 1.0738/1.0774, while H1 may retest the underside of 1.08 and hold.

Selling at current price, however, despite 1.08 giving way, is tricky. The top edge of daily demand is stationed within touching distance at 1.0781, and monthly price also trades from demand. Long plays above 1.08, therefore, might be a consideration.

February 19th 2020: FOMC Eyed as Dollar Index Marches North., FP Markets

AUD/USD:

Monthly timeframe:

Brought forward from previous analysis –

Demand at 0.6358/0.6839 remains in the fight, yet struggling to chalk up anything meaningful to the upside. An eventual break of the said demand zone has another layer of demand close by at 0.6094/0.5866, while a recovery could lead to trend line support-turned resistance (0.4776) making an appearance, followed by supply at 0.8303/0.8082.

Currently, the pair trades FLAT on the month.

Daily timeframe:

Partially altered outlook from previous analysis –

After marginally stabbing through support at 0.6670, the pair pencilled in a three-day bullish phase. Price, nonetheless, failed to sustain gains past last Wednesday’s high at 0.6750, leaving a trendline support-turned resistance level (0.7393) unopposed.

As of current movement, we are hovering within a cat’s whisker of the support at 0.6670, thanks to recent selling.

The RSI, for those who follow indicators, recently emerged from oversold territory, though has so far failed to connect with the 50.0 value.

H4 timeframe:

Since the beginning of last week, AUD/USD carved out a consolidation between supply drawn from 0.6761/0.6741 and a demand area coming in at 0.6699/0.6715. Recent selling saw the said demand’s lower edge shattered, followed up with a retest on Tuesday that held ground.

Limited support seen until we tackle the 0.6662 February 7th low.

H1 timeframe:

AUD/USD caught fresh offers in early trade Tuesday, following RBA minutes. Australia’s central bank reviewed the case for a further interest-rate cut, but decided against it in order to avoid encouraging additional borrowing as house prices climb. The Reserve Bank also expects the coronavirus outbreak to “subtract from growth in exports over the first half of 2020,” the minutes released Tuesday showed (source: Bloomberg).

Technical research has price hovering below the 0.67 handle in early Asia this morning, though the area of interest can be seen a little higher on the curve at 0.6707/0.6715, a demand-turned supply zone. Fibonacci studies (127.2% ext. and a 61.8% ret) converge within the said zone, as does the 100-period SMA.

Direction:

Short term, traders likely have their crosshairs on the H1 area of confluence at 0.6707/0.6715. Traders will want to see a quick move form out of here, in order to breach 0.67 as this could threaten downside potential.

Long term, the monthly timeframe is seen testing demand at 0.6358/0.6839, with daily price hovering north of support at 0.6670. So, despite the primary trend facing south and recent movement pivoting lower, medium-term recovery could still be in store.

February 19th 2020: FOMC Eyed as Dollar Index Marches North., FP Markets

USD/JPY:

Monthly timeframe:

Brought forward from previous analysis –

Since kicking off 2017, USD/JPY has been busy carving out a descending triangle pattern. The breakout for this configuration is common to the downside, but an upward breakout is considered more reliable and profitable.

Outside of the current pattern, a supply area is visible at 126.10/122.66, while lower on the curve we have a demand area at 96.41/100.81.

Currently, the pair trades +1.45% on the month.

Daily timeframe:

Brought forward from previous analysis –

Despite a reasonably healthy recovery since August 2019, involving the upper edge of a supply area being absorbed, long-term trendline resistance (114.54) has capped upside.

Should we eventually overthrow the said trendline, resistance resides close by in the form of a channel resistance (109.48) and a 78.6% Fibonacci retracement at 110.71 (red level). A rejection, on the other hand, has the 108.31 January 31st low to contend with, as well as nearby channel support (106.48) and demand at 107.82/108.04.

H4 timeframe:

Since early February, price action has stamped out a consolidation between a supply zone coming in at 110.23/110.04 and a supply-turned demand area at 109.65/109.49.

It’s important to take into account the upper edge of this range is bolstered by daily trendline resistance, which may lead to a breakout south to H4 demand at 109.30/109.42.

Another constructive development is the possibility of a head and shoulder’s top forming, though a retest at supply 110.23/110.04 may have to occur prior to the formation of the right shoulder.

H1 timeframe:

Against the backdrop of higher-timeframe flows, short-term action firmed on the back of broad-based USD bidding Tuesday and is currently seen chalking up a harmonic Gartley pattern at 110.03, the 78.6% X-A retracement. Note the 110 handle converges closely with the harmonic level, with a break of the round number likely drawing in supply at 110.25/110.15.

Direction:

With daily price continuing to respect trendline resistance, and H4 action threatening a H&S top pattern, completing the Harmonic Gartley pattern on the H1 may be of interest to sellers in this market, with the possibility of positioning protective stop-loss orders above the H1 supply at 110.25/110.15.

February 19th 2020: FOMC Eyed as Dollar Index Marches North., FP Markets

GBP/USD:

Monthly timeframe:

Brought forward from previous analysis –

Early February 2018 saw the pair reject 1.4520/1.3893, a 50.0% retracement and 38.2% Fibonacci retracement combination (red). This remains a well-rounded resistance area to keep an eye on long term.

In recent months, we’ve seen a recovery form off 1.1904/1.2235, clocking highs of 1.3514 in December 2019. Breaking the 1.3380 March 2019 high may eventually see a retest of 1.4520/1.3893.

Currently, the pair trades at -1.52% on the month.

Daily timeframe:

Sterling finished Tuesday pretty much unchanged. Price action on the daily timeframe denotes a somewhat hesitant tone, extending a multi-month range between supply at 1.3303/1.3184 and familiar demand at 1.2823/1.2910. Note we also have a local trendline resistance (1.3514) that could affect play in the event of a push higher.

Beyond the current demand, we have another port of demand, a touch larger than the current, at 1.2649/1.2799, which happens to house the 200-day SMA (1.2688).

H4 timeframe:

Brought forward from previous analysis –

The February 5th high 1.3070, a potential double-top formation (red arrows) that converges closely with a 61.8% Fibonacci retracement at 1.3079, was challenged last Thursday and remains central resistance on this timeframe.

An upward lift would likely tip price in favour of an advance to an engulfed supply area pencilled in from 1.3175/1.3142. Continued selling off 1.3070, nonetheless, has demand at 1.2916/1.2942 to target.

H1 timeframe:

UK jobs data saw a decent headline Tuesday, though wage growth metrics disappointed.

Tuesday’s technical report highlighted the following in terms of direction (italics):

Intraday breakout sellers below 1.30 are urged to tread cautiously. Clear H1 demand resides close by at 1.2965/1.2987. In fact, this may be an area we see sell-stop liquidity bought into from the said demand – round numbers, particularly large round numbers, are prone to whipsaws. Therefore, a test of demand that’s followed up with a H1 close back above 1.30 is indication buyers could take things higher from here.

As can be seen from the H1 chart, price did indeed respond to the H1 demand, likely using sell-stop liquidity to move higher. Unfortunately, though, the close above 1.30 was too large, leaving many traders unable to take advantage of the move.

The day ended with price pencilling in a correction from session highs at 1.3048 and retesting the 1.30 figure. The current demand at 1.2965/1.2987 is likely weaker due to yesterday’s test, therefore a decisive break beneath 1.30 today could target another layer of demand at 1.2916/1.2938 (set just ahead of daily demand at 1.2823/1.2910).

Direction:

Monthly price exhibits scope for a move higher to 1.4520/1.3893, while daily price could perhaps hinder upside at trendline resistance and a supply area noted at 1.3303/1.3184.

Intraday breakout selling below 1.30 is an option today, given the nearby H1 demand at 1.2965/1.2987 likely having been weakened, with a downside support target resting at demand drawn from 1.2916/1.2938.

February 19th 2020: FOMC Eyed as Dollar Index Marches North., FP Markets

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  • February 19th 2020: FOMC Eyed as Dollar Index Marches North., FP Markets
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